Xavier Baeten successfully completed his PhD defense

Doctoral work on firm-level corporate governance characteristics and CEO remuneration

Vlerick Leuven Gent Management School wishes to congratulate Xavier Baeten who recently successfully completed his doctoral dissertation defence. He obtained his title of Doctor in Applied Economic Sciences from the faculty of Economics and Business Administration of the Ghent University. This is a fantastic accomplishment in recognition of years of hard and dedicated work, combining a PhD with successfully running the Vlerick Reward Centre.

Xavier Baeten obtained a Master degree in Applied Economics at Ghent University in 1991 and a Master in Tax Legislation and Accountancy at Vlerick Business School in 1992. In 1996, together with Prof. dr. Lutgart Van den Berghe and Peter Leyman, he established the Volvo Research Roundtable ‘Employee Benefits’. He broadened the research scope of this centre into strategic rewards in 2000. In 2006, together with Prof. dr. Lutgart Van den Berghe, he established the Executive Remuneration Research Centre. Today, he is head of the Vlerick Reward Centre, which has long-term collaborations with more than 40 firms and provides executive education programmes in the field of strategic rewards and executive remuneration. He also serves as an independent member of various remuneration committees. In 2011 Xavier Baeten chaired the EIASM 3rd European Reward Management Conference in Brussels. Finally, he’s a co-author of two books in the field of reward management: ‘Reward Management – Facts and Trends in Europe’ (2008), and ‘Pay and Reward Systems in Organisations: Theoretical Approaches and Empirical Outcomes’ (2011).

Title: “Firm-level corporate governance characteristics and CEO remuneration: a cross-national European study” 
Date of PhD defense: 1 February 2012 
PhD supervisor: Prof. dr. Lutgart Van den Berghe

This dissertation focuses on the role of corporate governance structures as an important driver of CEO compensation and, more specifically, on the decision-making process concerning executive remuneration. While most previous studies in this field have taken the US as their geographical focus, this study answers the call to consider other corporate governance contexts that are characterised by less dispersed share ownership and other types of major shareholders. A database has been developed of almost 300 firms that are listed throughout Continental Europe, specifically Belgium, France, Germany, and the Netherlands.

The first part of this study focuses on the link between share ownership structures and the existence and composition of a remuneration committee. In this respect, the remuneration committee is considered to be a monitoring entity. The results show that shareholders who possess a higher proportion of the shares will monitor executive remuneration themselves rather than delegate this task to a remuneration committee.

The second part of the study concerns the link between the remuneration committee and CEO remuneration. Although it was expected that there would be a negative association between the existence of a remuneration committee and the level of CEO remuneration, the opposite was found. As far as the composition of the committee is concerned, we found evidence for the existence of subtle influence processes between the CEO and the committee, and also for the existence of CEO hubris (i.e., overconfidence).

The third part studies the association between share ownership structures and CEO remuneration. Interestingly, we found that not only share ownership concentration but also the typology of the major shareholder has links with CEO remuneration.

This study has added value from multiple perspectives. First, it focuses on the European context. Second, it not only focuses on the level of CEO remuneration but also on its structure. Third, it considers the composition of the remuneration committee from an integrated perspective, including expertise, independence, and diversity as its main characteristics. Fourth, it not only focuses on share ownership concentration but also on the typology of the major shareholder. Fifth, it takes an integrated view on corporate governance by focusing on share ownership as well as the remuneration committee as predictor variables in the field of CEO remuneration.

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